Upon termination or expiration of the Development Agreement, does the Chicken Guy developer have to continue abiding by the covenants in Section 12?
Chicken_Guy Franchise · 2025 FDDAnswer from 2025 FDD Document
If, at any time during the 1-year period following expiration or earlier termination of this Agreement, Developer fails to comply with its obligations under this Section, that period of noncompliance will not be credited toward Developer's satisfaction of the 1-year obligation.
- **D.
Additional Remedies for Breach.** In addition to any other remedies or damages permitted under this Agreement, if Developer breaches Section 12.C.(2)(c) ("Covenants Against Competition") during the 1-year period following the expiration or earlier termination of this Agreement, for each restaurant business that violates those Sections, Developer shall pay to Chicken Guy: (1) a fee equal to Chicken Guy's then-current Initial Franchise Fee for franchised Chicken Guy!
Restaurants; and (2) 8% of the gross sales of that restaurant business until the expiration of the 1-year period following the expiration or earlier termination of this Agreement.
Developer acknowledges that a precise calculation of the full extent of Chicken Guy's damages under these circumstances is difficult to determine and the method of calculation of such damages as set forth in this Section 12.D. is reasonable.
Developer's payment to Chicken Guy under this Section shall be in addition to any attorney's fees and other costs and expenses to which Chicken Guy is entitled pursuant to Section 22.E.
Developer acknowledges that breach of the Covenants Against Competition by Developer shall cause irreparable harm to Chicken Guy in addition to monetary damages and nothing in this Section 12.D. shall preclude Chicken Guy from obtaining appropriate injunctive relief to enforce the Covenants Against Competition and specific performance to enforce this Section 12.D.
- **E.
Modification.** Chicken Guy shall have the right, in its sole discretion, to reduce the scope of any covenant in this Section 12 effective immediately upon Developer's receipt of written notice, and Developer agrees that it shall comply forthwith with any covenant as so modified, which shall be fully enforceable notwithstanding the provisions of Section 20.
- **F.
Execution of Covenants by Third Parties.** At Chicken Guy's request, Developer shall require and obtain the execution of covenants similar to those set forth in this Section 12 (including covenants applicable upon the termination of an individual's relationship with Developer) from all guarantors of Developer's obligations.
Source: Item 23 — RECEIPTS (FDD pages 50–286)
What This Means (2025 FDD)
According to the 2025 Chicken Guy Franchise Disclosure Document, the restrictions outlined in Section 12 of the Development Agreement continue to apply to the developer even after the agreement's termination or expiration. Specifically, the covenants against competition described in Section 12.C.(2)(c) remain in effect for a one-year period following the termination or expiration of the agreement.
If a Chicken Guy developer breaches these covenants against competition during that one-year period, they are obligated to pay Chicken Guy a fee equivalent to the then-current Initial Franchise Fee for a franchised Chicken Guy restaurant. Additionally, the developer must pay 8% of the gross sales of the violating restaurant business until the end of the one-year period following the agreement's termination or expiration. These payments are in addition to any attorney's fees and other costs Chicken Guy may incur.
Chicken Guy emphasizes that accurately calculating the full extent of damages from a breach of these covenants is difficult, and the method of calculating damages as described in Section 12.D is considered reasonable. Furthermore, a breach of these covenants can cause irreparable harm to Chicken Guy, entitling them to seek injunctive relief to enforce the covenants and specific performance of Section 12.D.
Chicken Guy also retains the right to modify the scope of any covenant in Section 12 by providing written notice to the developer. The developer is then required to comply with the modified covenant immediately, and it remains fully enforceable. Additionally, Chicken Guy may request the developer to ensure that all guarantors of the developer's obligations also execute covenants similar to those in Section 12, including those applicable after the termination of an individual's relationship with the developer.